
Quoting
hr for me
you are mis-stating this a bit... the ex-employee has the choice NOW..... It is not a good idea to take a lump sum and pay taxes now, but to rollover which is what the OP stated they were going to do.
the rollover check is made out to the IRA company FBO (for the benefit of) the employee's name -- NOT directly to the employee's name. The employee CAN'T cash the check even if mailed directly to them and directly in their hands. There is no way for the money to go through his hands while also going to an IRA. The recordkeeper WILL withhold taxes unless the employee gives an IRA company/account...it's the default. But yes, the ex-employee can get cashed out totally and that's a bad idea due to the early withdrawal penalty and taxes....